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Running a Villa in Bali – A Detailed Guide to Get it Right and Legal

Posted 16.06. 2018 by Cekindo / Last update on 29.08. 2018

Running a Villa in Bali – A Detailed Guide to Get it Right and Legal Review by Pavla Travnickova on 16. 6. 2018 Company Registration in Indonesia, Market Research in Indonesia, Work Permit in Indonesia, Product Registration in Indonesia, Local Partner Selection in Indonesia, Trade Mission in Indonesia, Company Formation in Indonesia, Company Establishment in Indonesia, Company Set Up in Indonesia, Payroll Outsourcing in Indonesia, Tax Reporting in Indonesia, Medical Product Registration in Indonesia, Medical Device Registration in Indonesia, Cosmetic Registration in Indonesia, Food Supplement Registration in Indonesia.
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There’s no doubt Bali is one of the most popular destinations in Southeast Asia. This Indonesian island draws more than 6 million tourists in a year. In the first half of 2017, the arrivals of foreign visitors went by almost 24 percent! That’s around 3.4 million people who are looking for a perfect accommodation — your villa in Bali.

Tourists are not the only ones interested in Bali. Expats would like to capitalise on its economy by building hostels and guesthouses for backpackers or villas and resorts for tourist who want to enjoy Bali with all its luxury.

Planning, though, is only a fraction of the entire process. A significant part of it goes towards securing the right building permits and licenses. This one can be challenging to navigate.

To help you, Cekindo provides a basic guide on how to run your own hostel or villa in Bali.

running villa in Bali

Property Rights

As a businessperson, one of your responsibilities is to safeguard your assets. If you are building an accommodation, for example, these assets could refer to both the land and the property.

In Bali and anywhere else in Indonesia, there are several land restrictions for foreign nationals. For one, non-Indonesian citizens cannot own any of these assets as individuals. It doesn’t mean, however, you won’t have access to land. There are certain property rights you can explore.

In a nutshell, you can own the following ones, but if you want to know more — check our in-depth overview of Property Rights for Foreigners in Bali.

 

1. Right to Build (Hak Guna Bangunan)

One of the first types of rights you can explore is the right to build. An HGB certificate allows you to build structures on certain kinds of land. These include a freehold title, which is limited to Indonesians only, and state-owned land.

With this certificate, you can potentially use the land for as long as 80 years. Upon the approval, you can build and operate for 30 years. After that, you can request an extension for 20 years. You can also renew it for another 30 years.

However, if it’s freehold land, the certificate is valid for 30 years only. Subsequently, you need to negotiate a new agreement with the Indonesian owner.

This title offers many advantages besides the length of the validity. You can also use the title to secure a bank debt since you can make it as collateral. As an Indonesian legal entity, you can have the option to sell, exchange, or bequeath the land.

The HGB certificate, though, isn’t for everyone. It can only be for Indonesian citizens and Indonesian-based corporate entities such as PT PMA. Cekindo can help you with the company registration process.

 

2. Right to Use (Hak Pakai)

Setting up a PT PMA is one of the best ways to have access to Bali land. Not everyone can do it, however.

Expats who cannot open a PT PMA can still use an Indonesian land using the “right to use” title. With Hak Pakai, you can rent it for a period of no more than 25 years. Depending on the agreement between the lessor and the lessee, it can extend up to 80 years.

The primary benefit of this setup is it is open to foreign individuals as long as they hold a KITAP or a KITAS.

 

How to Build and Operate a Villa in Bali

At Cekindo, we can help you understand the ins and outs of regulations that govern hotel industry in Bali. For the sake of discussion, there are two important points: accommodation license and Ijin Mendirikan Bangunan (IMB). Let’s discuss each.

When it comes to a license for an accommodation, you have two possible options. It all depends on the number of rooms and the type of housing you have.

 

Homestay License

Take, for example, a homestay. It allows a tourist to stay with a local family for a fee. The rooms are usually basic or cheaper than other forms of accommodation.

For this, you need to acquire a Pondok Wisata license. It is a homestay license to operate a villa as vacation rentals and applies to properties that have between 3 and 5 rooms. It all depends on when you have obtained the license.

 

Hotel License

If your property aims to provide more than 5 rooms, you need to have a full hotel license. It is also known as a Melati license. This one is not easy to obtain due to the many requirements to meet. For example, the hotel needs to be within a tourism zone. It should also be around 500 metres away from the beach.

 

Building License

Aside from the license, you also need to secure a building license or the IMB. It is essentially a document that says you are allowed to construct a building. It also outlines the purpose of such structure.

Who gets the IMB depends on the owner of the structure. If it is under your name, then it becomes your responsibility. If you’re leasing the property, then your landlord needs to obtain it on your behalf. This process takes about 3 months to complete.

 

Negative Investment List

Note that other regulations may affect your license and ability to operate in Bali as well. One of these is the percentage of foreign ownership. Foreign entities can own 5-star hotels wholly. Homestays are only for the local citizens. A foreigner may hold 67 percent for a non-star accommodation.

Furthermore, the local government may impose guidelines on hotel permits. For example, in well-developed areas in Kuta, the Regent of Badung changed the size of the plot in which one can develop an accommodation. Since 2014, it no longer allows properties to sit on land less than half a hectare. That’s about 5,000 square metres. In South Kuta, the minimum plot size is 1 hectare. In North, it’s about 7,500 square metres.

 

Foreigner Police Report

Here’s the interesting thing about operating an accommodation in Bali: the foreigner police report letter. Also known as Surat Tanda Melapor (STM), it is an A4-sized document and a proof that the foreigner is staying or registered in the accommodation.

Since the Immigration Law No. 6 in 2001, both accommodations and foreigners no longer have to process this. However, there are times when you may have to do this.

First, you may be required by the police to get one. Second, your lessor may not be confident with one of your foreign guests. Anyone who wants to obtain civil registry papers may also need to have it.

Who is responsible for getting it? If you’re an accommodation, then it becomes your duty. You need to provide your KITAS/KITAP, accommodation license, and a copy of the passport of the guest. If you’re a homestay, you still need to do the same.

 

Do not Forget!

  • The most reliable way to start a guesthouse or villa in Bali is to register a PT PMA. It makes your business an Indonesian legal entity.
  • Some businesses use a local nominee as a way of shortening the process. The idea is the local citizen owns the land, but you have the full control of it and the building. The problem comes in when the chosen person is not trustworthy. Since the property is not under your name, it’s hard to contest such possession.

 

You can uncomplicate the process of building and operating an accommodation in Bali. Contact us to get more information. Our business consultants are ready to assist you.






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